The opinion of the court was delivered by: Richard Mills, District Judge:
Another chapter in the unremitting saga of RICO.
This cause is before the Court on the Germania Defendants'
(Germania Federal Savings & Loan Association, David Kilduff,
and David Stelbrink) renewed motion to dismiss Plaintiffs'
civil RICO claims (Counts IV, V, VI) in light of recent Seventh
Circuit cases which flesh out the "pattern of racketeering"
requirement of RICO. 18 U.S.C. § 1962(a).
Further, Defendants challenge the constitutionality of RICO
on void for vagueness grounds.
The facts as pled in the complaint — and assumed to be true
for purposes of this motion — are somewhat lengthy, but
important to the resolution of the motion. Plaintiffs are
Orchard Hills Cooperative Apartments, Inc. (Orchard) and its
President, James E. Berger. The Defendants include Germania
Federal Savings and Loan Association (Germania), whose
principal place of business is Alton, Illinois, with offices in
Springfield, Illinois. Defendant Stelbrink (at all relevant
times) was Vice-President of Germania. Defendant Kilduff (at
all relevant times) was Germania's principal officer
responsible for the management affairs of Orchard. Defendant
Michel-Potter Properties is an Illinois general partnership
whose principals are Defendants Michel and Potter.
In 1973, real estate developer Frank Brewster constructed a
136-unit apartment complex in Springfield, Illinois, originally
called "Georgetown Colony Apartments." In 1973 or 1974,
Germania, which had provided the financing for Brewster,
foreclosed on the property — thereby becoming the beneficial
and equitable owner thereof. Germania then formed Orchard Hills
Cooperative Apartments, Inc., as a not for profit corporation,
placed title to the foreclosed property in the name of Orchard,
and renamed the complex "Orchard Hills Apartments."
In September of 1977, Orchard gave Germania a first mortgage
on the complex. At the same time, Germania contracted with
Orchard to act as Orchard's agent (for a management fee) to
care for the property — collect rent, prevent waste, manage
the financial, legal, and day-to-day affairs, and most
importantly to find a purchaser for the property. Pursuant to
this agreement, Germania, through its agents Kilduff and
Stelbrink, identified Michel as a prospective purchaser.
Kilduff and Stelbrink then negotiated the material terms of the
proposed sale with Michel and, in November 1980, presented the
proposed sale to Orchard's Board of Directors.
The upshot of the transaction was this: Michel-Potter bought
Orchard for $2.95 million and then, on the same day, sold it to
a group of investors for $4.4 million — thereby making a
healthy profit. Meanwhile, Germania substituted a $2.7 million
mortgage at 8.75% for a $4.4 million mortgage at 14.5%.
(Orchard knew nothing of Michel-Potter's subsequent sale until
September of 1984 — nearly four years later.)
In support of their RICO claims, Plaintiffs assert that
Defendants committed numerous acts of mail and wire fraud, that
they were involved in a scheme to defraud Plaintiffs, and that
the "continuous association of Defendants in the enterprise
while committing the unlawful acts . . . constitutes a pattern
In ruling on a motion to dismiss, the Court "must accept the
well pleaded allegations of the complaint as true. In addition,
the Court must view these allegations in the light most
favorable to plaintiff." Gomez v. Illinois State Board of
Education, 811 F.2d 1030, 1039 (7th Cir. 1987). The applicable
rules do not necessitate a detailed outline of the claim's
basis. Ellsworth v. City of Racine, 774 F.2d 182, 184 (7th Cir.
1985), cert. denied, 475 U.S. 1047, 106 S.Ct. 1265, 89 L.Ed.2d
574 (1986). Still, a "complaint must contain either direct or
inferential allegations respecting all the material elements
necessary to sustain a recovery under some viable legal
theory." Car Carriers, Inc. v. Ford Motor ...